ECC to allow cost build-up for RLNG pricing
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ISLAMABAD: The government has decided in principle to allow cost build-up of about eight different heads in the final price of regasified liquefied natural gas (RLNG) that would almost equal the LNG import price.
This would be one of the top agenda items of Economic Coordination Committee (ECC) of the Cabinet which meets here on Thursday with Finance Minister Ishaq Dar in the chair.
The meeting would also take up import of over a million tonnes of urea for Kharif crop, relief package for Ramazan, restructuring option of Pakistan Steel Mills (PSM) and pricing of petroleum products on a cost and freight basis.
Informed sources said that although the government has already imported 140,000 tonnes of LNG and pumped into the national gas transmission system, the pricing of RLNG, allocations of quota and all other matters were being taken up post facto. This showed the petroleum ministry and its associated companies have been dealing LNG project of national importance in a haphazard manner.
“To keep an option of commissioning of LNG terminal through PSO , PSO may be allowed to import one commissioning cargo through Floating Storage and Regasification Unit (FSRU) on FOB (free on board) or LNG carrier on DES (delivered ex-ship) basis under LNG sales purchase agreement (SPA),” requested the summary of the petroleum ministry seeking ECC approval.
The petroleum ministry also proposed RLNG pricing for power sector, bulk consumers and fertiliser plants on a monthly basis without public hearing by Ogra under a straight formula even though existing laws do not allow gas pricing without public hearing.
It proposed LNG price DES, margin for PSO, terminal charges, SSGC’s administrative margin for LNG supply agreement, SSGC’s cost of service and transportation charges, SNGPL’s cost of service and transportation charges, transmission and distribution losses.
Based on these factors, the price of RLNG at the doorstep of a power or fertiliser plant would reach $14.1 per mmbtu if LNG was available at a purchase price of $7 per mmbtu in Qatar.
About 50 per cent of transportation charges of gas companies would be treated as non-operating income for both gas companies to improve their profitability.
The Ministry of Finance has conditionally supported the pricing mechanism proposed by the petroleum ministry provided it had the legal cover.
The Planning Commission also supported the pricing heads but opposed doing away with the process of public hearing for the purpose of transparency.
A petroleum ministry spokesperson, however, claimed that all the companies and stakeholders had arrived at mutually agreed conclusions in consonance with their assigned roles under an inclusive process from the start.
The ministry said the award for construction of LNG terminal and subsequent supply of RLNG followed a transparent mechanism, duly approved by the respective boards of the relevant companies who followed stringent processes and protocols.
The spokesperson said the managements of the companies were not coerced into signing any agreement and progress was materialised due to collaborative efforts and team work of all the stakeholders involved.
Published in Dawn, April 23rd, 2015
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